DCIT, New Delhi V. M/s PPC Business and Products Pvt. Ltd., New Delhi

ITA 1733/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97069 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 02-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK WADEKAR
• Assessee Lawyers: SUSHANT BAJPAI
• Keywords: Search and seizure; Period of limitation; Question of law; Block assessment; Right to appeal; Time period of passing order
• Section: 143(3); 142(1); 153A; 14A; 68; 132; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F, NEW DELHI) BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER I.T.A. NO.1733 /DEL/2011 ASSESSMENT YEAR : 2006-07 DCIT, CC-25, VS. PPC BUSINESS AND PRODUCTS PVT. L TD., NEW DELHI 13-B, 3 RD FLOOR, NETAJI SUBHASH MARG, DARYA GANJ, NEW DELHI GIR / PAN:AAACP7862Q C.O. NO.266/DEL/2012 (ASSESSMENT YEAR 2006-07) PPC BUSINESS AND PRODUCTS VS. DCIT, CC-25, PVT. LTD., NEW DELHI. 13-B, 3 RD FLOOR, NETAJI SUBHASH MARG, DARYA GANJ, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIVEK WADEKAR CIT DR RESPONDENT BY : SHRI RAJIV SAXENA & SHRI SUSHANT BAJPAI, ADV. DATE OF HEARING : 02.07.2015 DATE OF PRONOUNCEMENT : 14.08.2015 ORDER PER J. S. REDDY, AM: THESE ARE CROSS APPEALS FILED BY REVENUE AND THE A SSESSEE AGAINST THE ORDER OF LD. CIT(A) I, NEW DELHI DATED 14.01.2011 F OR THE ASSESSMENT YEAR 2006-07. ITA NO.1733/DEL/2011 C.O.266/DEL/2012 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE MAIN AL LEGATION AGAINST THIS GROUP WAS THAT THEY HAD TAKEN A LARGE NUMBER OF ACC OMMODATION ENTRIES IN VARIOUS GROUP COMPANIES BY PAYING CASH TO THE VARIO US ENTRY OPERATORS. AFTER RECORDING SATISFACTION NOTE, A NOTICE U/S 153 C AS ISSUED ON 24.11.2008 TO THE ASSESSEE REQUIRING IT TO FILE THE RETURN OF INCOME IN THE PRESCRIBED FORM. IN RESPONSE THE ASSESSEE COMPANY VIDE LETTER DATED 30.12.2008 SUBMITTED THAT THE PREVIOUS RETURN DECLARING INCOME AT RS. 12,43,2201- FILED ON 30.03.2007 MAY KINDLY BE DEEMED AS THE RETURN OF INCOME SUBMITTED IN RESPONSE TO NOTICE 153C. NOTICE U/S 142(1) DATED 15 .11.2008 WAS ISSUED TO THE ASSESSEE FIXING THE CASE FOR HEARING ON 8.12.20 08. FURTHER NOTICE U/S 143(2) WAS ISSUED ON 15.09.2009 FOR 25.09.2009. ON 25.09.2009 A QUESTIONNAIRE ASKING CERTAIN DOCUMENTS WAS ISSUED F IXING THE CASE FOR 05.10.2009. A SUPPLEMENTARY QUESTIONNAIRE ALONG WIT H NOTICE U/S 142(1) WAS ALSO ISSUED ON 6.11.2009 AND THE HEARING WAS FIXED HEARING ON 13.11.2009. IN RESPONSE TO STATUTORY NOTICES U/S 142(1) & 143(2 ) AND QUESTIONNAIRE, SH. KAMAL KUMAR AGGARWAL, CHARTERED ACCOUNTANT, OF THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FILED THE DETAILS . THE CASE WAS DISCUSSED WITH HIM. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY COULD NOT UNDERTAKE THE BUSINESS OF MANUFACTURING OF PERF UMERY COMPOUNDS. 3. THE A.O. COMPLETED THE ASSESSMENT U/S 153C READ WITH SECTION 143(3) ON 24.12.2009 DETERMINING THE TOTAL INCOME A T RS.26,47,515/- AFTER MAKING ADDITION OF RS.2.5 CRORES UNDER SECTION 68 A ND RS.2,31,295/- U/S 14A OF THE ACT. AGGRIEVED, THE ASSESSEE CARRIED THE MA TTER IN APPEAL. THE FIRST APPELLATE AUTHORITY PARTLY ALLOWED THE APPEAL. AGG RIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: ITA NO.1733/DEL/2011 C.O.266/DEL/2012 3 M/S PPC BUSINESS AND PRODUCT PVT. LTD.(A.Y.2006-07 ) APPEAL NO. 531/09-10 DT. 14.01.2011. THE ORDER OF THE LD. CIT (APPEALS) IS NOT CORRECT IN LAW AND FACTS. IN THE FACTS AND CIRCUMSTANCE OF THE CASE ID.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,50,00 ,0001- MADE U/S 68 OF THE 1. T. ACT, 1961 BY THE AO IN RESPECT OF SHAR E APPLICATION MONEY INTRODUCED DURING THE YEAR. 4. THE ASSESSEE FILED CROSS OBJECTION ON THE FOLLOW ING GROUNDS: 1. THAT THE LD. CIT (A) HAS ERRED IN LAW AS WELL A S ON FACTS IN REJECTING GROUND NO. 1 CHALLENGING THE ASSESSMENT B AD IN LAW :- A) BECAUSE THERE WAS NO MATERIAL! INCRIMINATING MAT ERIAL FOUND AS RESULT OF SEARCH SO AS TO INITIATE PROCEEDINGS U/S 153 C OF THE INCOME- TAX ACT. B) BECAUSE ADDITIONS MADE U/S 68 ON ACCOUNT OF SHAR E APPLICATION MONEY WAS NOT BASED ON ANY SEARCH MATERIAL. 2. THAT ASSESSMENT MADE U/S 153 C IS BAD IN LAW BEC AUSE IT WAS ON THE BASIS OF SEARCH CONDUCTED IN SURYA VINAYAK G ROUP AND NOTHING ADVERSE SPECIFICALLY RELATING TO THE ASSESSEE WAS F OUND AND REFERRED TO BY THE AO. 3. THAT THE LD. CIT (A) HAS ERRED IN LAW AS WELL ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 2,31,295/- U/S 1 4 A R.W.R. 8D OF IT RULES. IT IS, THEREFORE, PRAYED THAT DEPARTMENTAL APPEAL M AY KINDLY BE DISMISSED. 5. DURING THE COURSE OF HEARING, ASSESSEE FILED ADD ITIONAL GROUND OF CROSS OBJECTION WHICH READS AS FOLLOWS: THAT ASSESSMENT MADE U/S 153C IS BARRED BY LIMITAT ION AS THEY WERE REQUIRED TO BE COMPLETED BY 31/12/2008 AS PER SECTI ON 153B OF THE I. T. ACT, 1961 WHILE THE SAME WAS MADE ON 24.12.2009. THIS GROUND RELATES TO LIMITATION OF ASSESSMENT HENCE IT CAN BE TAKEN AT ANY TIME DURING THE PENDENCY OF APPEAL WHICH IS A SETTLED LA W. 6. AFTER HEARING RIVAL CONTENTIONS, WE ADMIT THIS A DDITIONAL GROUND OF CROSS OBJECTION BY FOLLOWING THE DELHI BENCH G DE CISION IN THE CASE OF ITA NO.1733/DEL/2011 C.O.266/DEL/2012 4 ACIT VS J. H. FINVEST PVT. LTD. IN I.T.A. NO. 1291- 1297/DEL/2011 AND OTHERS ORDER DATED 30.05.2014 WHEREIN, IN PARA 6 & 7 IT IS HELD AS UNDER: 6. CONSIDERING THE ABOVE SUBMISSION, WE ARE OF THE VIEW THAT IT IS NOW A WELL SETTLED PROPOSITION OF LAW THAT WHILE AD JUDICATING OBJECTIONS RAISED IN THE CROSS- OBJECTION, THE SAME WILL BE DISPOSED OF AS AN APPEAL.. THUS, IT DOES NOT MAKE DIFFERENCE AS TO WHETHER AN ADDITIONAL GROUND IS RAISED IN THE APPEAL OR THE CR OSS OBJECTION. THE ONLY REQUIREMENT FOR PERMITTING ADJUDICATION OF AN ADDITIONAL GROUND IS THAT THE ISSUE RAISED IS LEGAL IN NATURE IT GOES TO THE ROOT OF THE MATTER AND FOR ADJUDICATION OF WHICH NO FRESH MATER IAL OUTSIDE THE RECORD IS REQUIRED TO BE CONSIDERED. THE HON'BLE SU PREME COURT IN THE CASE OF NT PC LTD. VS. CIT (SUPRA) HAS BEEN PLE ASED TO DEAL WITH THE ISSUE IN DETAIL AND HAS COME TO THE FOLLOWING C ONCLUSION:- ' WE DO NOT SEE ANY REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD ON RESPECT OF THAT ITEM. WE DO NOT SEE ANY REASON TO RESTRICT THE POWER OF THE TRI BUNAL U/S 254 ONLY TO DECIDE THE GROUND WHICH ARISE FROM THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEAL/CROSS-OBJECTIONS BEF ORE THE TRIBUNAL. WE FAIL TO SEE WHY THE TRIBUNAL SHOULD BE PREVENTED FR OM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. ' 6.1 IN ITS EARLIER DECISION IN THE CASE OF JUTE COR PORATION OF INDIA LTD VS ..... CIT (SUPRA), THE HON'BLE SUPREME COURT HAS BEEN PLEASED TO HOLD AS UNDER.- ' THE VIEW THAT THE TRIBUNAL IS CONFINED ONLY TO IS SUES ARISING OUT OF THE APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (A PPEALS) TAKES TOO NARROW A VIEW OF THE POWERS OF THE APPELLATE TRIBUN AL (VIDE, E.G., CIT VS. ANAND PRASAD [1981] 128 ITR 388 (DELHI), CIT RS . KARAMCHAND PERMCHAND P. LTD. [1969] 74ITR 254 (GUJ) AND EIT VS . CELLULOSE PRODUCTS OF INDIA LTD. [1985] 151 ITR 499 (GUJ) [FB ]). UNDOUBTEDLY, THE TRIBUNAL WILL HAVE THE DISCRETION TO ALLOW OR NOT ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIB UNAL IS ONLY ITA NO.1733/DEL/2011 C.O.266/DEL/2012 5 REQUIRED TO CONSIDER A QUESTION OF LAW ARISING FROM THE FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS WE FAIL TO SEE WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE'. 6.2. THE ISSUE PERTAINING TO LIMITATION IS A QUESTI ON OF LAW AFFECTING THE VERY JURISDICTION OF THE AO WHICH CAN BE TAKEN AT ANY POINT OF TIME BEFORE US DURING THE PENDENCY OF THE APPEAL. THIS V IEW IS WELL SUPPORTED BY THE HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. BRITISH INDIA CORPORATION LTD. (SUPRA) HOLDING THAT THE QUESTION OF LIMITATION AS A MANDATE TO THE FORUM AND IRRESPECTI VE OF THE FACT WHETHER IT WAS RAISED OR NOT, THE FORUM MUST CONSID ER AND APPLY IT, IF THERE IS NO DISPUTE ON FACTS. THE HON'BLE M.P HIGH COURT IN THE CASE OF CIT VS. MD. IQBAL (SUPRA) HAS BEEN PLEASED TO HO LD THAT THE QUESTION OF LIMITATION CAN BE RAISED AT ANY POINT O F TIME BECAUSE IT GOES TO THE ROOT OF THE MATTER. THEREFORE, IT IS WR ONG TO CONTEND THAT THE TRIBUNAL SHOULD NOT HAVE PERMITTED THE ASSESSEE TO RAISE THE ADDITIONAL PLEA OF LIMITATION FOR THE FIRST TIME. T HE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MAHINDRA & MAHINDRA LTD . VS. DCIT (SUPRA) HAS HELD AS UNDER:- 'BE THAT AS IT MAY WE FIND THAT THE QUESTION OF LIM ITATION GOES TO THE VERY JURISDICTION OF THE MATTER. IF THE PROCEEDINGS ARE INITIATED OR COMPLETED BEYOND THE PRESCRIBED TIME THEN SUCH PROC EEDINGS DESERVE TO BE QUASHED. IT IS THE SETTLED LEGAL POSITION THA T THERE CAN BE NO EMBARGO ON ANY PARTY TO RAISE A LEGAL GROUND FOR TH E FIRST TIME BEFORE THE TRIBUNAL PROVIDED THE RELEVANT MATERIAL FOR DEC IDING THAT QUESTION ALREADY EXISTS ON RECORD AND NO FURTHER INVESTIGATI ON OF FACTS IS REQUIRED. ' 7. CONSIDERING THESE MATERIAL ASPECT, WE ARE OF THE VIEW THAT THE ASSESSEE IS VERY MUCH ENTITLED TO RAISE THE ADDITIO NAL GROUND IN QUESTION AND SINCE THE ISSUE OF ASSESSMENT BEING BA RRED BY TIME LIMITATION, A LEGAL ISSUE GOES TO THE ROOT OF THE M ATTER AND ADJUDICATION OF WHICH DOES NOT REQUIRE CONSIDERATIO N OF FRESH MATERIAL BEYOND RECORD, WE ALLOW THIS ADDITIONAL GROUND FOR THE ADJUDICATION OF THE BENCH. THE PARTIES WERE PERMITTED TO PROCEED ON MERITS OF THIS ADDITIONAL GROUND. ITA NO.1733/DEL/2011 C.O.266/DEL/2012 6 7. THUS, THE ADDITIONAL GROUND OF CROSS OBJECTION I S ADMITTED. 8. AFTER HEARING RIVAL CONTENTIONS ON THIS ADDITION AL LEGAL GROUND, W FIND THAT THIS ISSUE IS COVERED BY THE ORDER OF THE ITAT IN I.T.A. NO. 1291- 1297/DEL/2011 IN THE CASE OF J.H. FINVEST PVT. LTD. (SUPRA). AT PARA 10 ONWARDS, IT IS HELD AS UNDER: 10. CONSIDERING THE ABOVE SUBMISSION IF THE DATED 23.03.2007 IS TAKEN AS THE DATE OF AUTHORIZATION, EXECUTED AS PER SECITON153B OF THE ACT THEN THE A.O. WAS REQUIRED TO FRAME THE ASSESSM ENT WITHIN 21 MONTHS FROM THE DATE FROM THE END OF THE FINANCIAL YEAR IN WHICH LASTS OF THE AUTHORIZATION WAS EXECUTED AS PER SECITON153 B. AS PER THIS PROVISION, THE A.O. HAD TO COMPLETE THE ASSESSMENT BY 21.12.2008 IN THE PRESENT CASE, HOWEVER, THE ASSESSMENT U/S 153A/ 153C HAVE BEEN COMPLETED ON 24.12.2009/31.12/2009. IT IS THUS APP ARENT THAT THE ASSESSMENT U/S 153A OR 153C ON 24.12.2009 OR 31.12. 2009 HAVE BEEN FRAMED BEYOND 21 MONTHS FROM THE DATE FROM THE END OF THE FINANCIAL YEAR IN WHICH LAST OF THE AUTHORIZATION WAS EXECUTE D AS PER SECTION 153B. 10.1. HAVING GONE THROUGH THE RELEVANT PROVISIONS O F THE 1.T ACT, IT IS PERTINENT TO MENTION OVER HERE THAT ASSESSMENT/REAS SESSMENT IN SEARCH CASES IS REQUIRED TO BE MADE WITHIN THE TIME SPECIF IED U/S 153B OF THE ACT. THE ASSESSMENT/REASSESSMENT IN RESPECT OF SIX ASSESSMENT EARS SPECIFIED IN SECTION 153A (1 ) (B) AS WELL AS THE A SSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH [I-CO NDUCTED U/S 132 OR REQUISITION IS MADE U/S 132 A HAS TO BE MADE WITHIN THE PERIOD OF TWO YEARS FROM THE END OF THE FINANCIAL YEARS IN WHICH LAST OF THE AUTHORIZATIONS FOR SEARCH U/S 132 OR REQUISITE U/S 132A WAS EXECUTED. 10.2. HOWEVER, THE FIRST PROVISO TO SECTION 153 B P ROVIDES THAT ASSESSMENT/REASSESSMENT IN RESPECT OF PERSON REFERR ED TO IN SECTION 153C HAS TO BE MADE WITHIN THE PERIOD OF TWO YEARS AS MENTIONED IN THE PRECEDING PARAGRAPH OR ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH BOOKS OF ACCOUNTS OR DOCUMENTS OR ASS ETS SEIZED OR REQUISITION ARE HANDED OVER U/S 153C TO THE AO HAVI NG JURISDICTION OVER SUCH OTHER PERSONS, WHICHEVER IS LATER. HOWEVE R, THE PERIOD SPECIFIED UNDER VARIOUS CLAUSES OF THE EXPLANATION TO SECTION 153B ITA NO.1733/DEL/2011 C.O.266/DEL/2012 7 WILL HAVE TO BE EXCLUDED WHILE COMPUTING PERIOD OF LIMITATION U/S 153B. THIS LIMITATION PERIOD IS APPLICABLE TO THOSE CASES WHERE LAST OF THE AUTHORIZATIONS FOR SEARCH U/S 132 OR FOR REQUIS ITION U/S 132A WAS EXECUTED BEFORE 114/2004. WHERE SUCH AUTHORIZATION HAS BEEN EXECUTED ON OR AFTER 1/4/2004, THE PERIOD OF LIMITA TION WOULD BE 21 MONTHS AS PER THE SECOND PROVISO. THE THIRD PROVISO PROVIDES THE PERIOD OF LIMITATION AS 3 MONTHS WHERE (I) LAST OF THE AUTHORIZATION U/S 132 OR 132 A WAS EXECUTED ON OR AFTER 1/4/2005 AND (II) DURING THE COURSE OF ASSESSMENT PROCEEDINGS A REFERENCE U/S 92 C A_(A) WAS MADE BEFORE 11612007 BUT AN ORDER U/S 92 CA (3) WAS NOT MADE BEFORE SUCH DATE OR (B) IS MADE ON OR AFTER 1/6/200 7. THAT MEANS WHERE ORDER U/S 92CA(3) HAS BEEN MADE BEFORE 1/6/20 07, THE PERIOD OF LIMITATION WOULD BE AS PER THE MAIN PROVISIONS O F SUB SECTION (1) OR THE FIRST OR SECOND PROVISO AS THE CASE MAY BE. THE FORTH PROVISO IS APPLICABLE TO THE PROCEEDINGS WHICH WERE INITIATED WITH REFERENCE TO, SECTION 153C AND REFERENCE TO U/S 92CA HAS BEEN MAD E AS MENTIONED IN THE THIRD PROVISO. IN SUCH CASES, THE PERIOD OF LIMITATION IS 33 MONTH FROM THE END OF THE FINANCIAL YEAR IN LAST OF AUTHO RIZATION U/S 1321132A WAS EXECUTED OR 21 MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH BOOKS OF ACCOUNTS OR DOCUMENTS OR ASS ETS SEIZED OR REQUISITE ARE HANDED OVER U/S 153C TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON, WHICHEVER IS LATER. 10.3. THE 'AUTHORIZATION' MENTIONED IN SECTION 153B SHALL BE DEEMED TO HAVE BEEN EXECUTED WHEN THE LAST PANCHNAMA IS DR AWN IN THE CASE OF SEARCH OR ON THE DATE WHEN THE BOOKS OF ACCOUNTS / OTHER DOCUMENTS/ ASSETS ARE ACTUALLY RECEIVED IN THE CASE OF REQUISI TE U/S 132A AS PER EXPLANATION (2) TO SECTION 153 B. THE PROVISIONS OF SECTION 153B ARE MORE OR LESS SIMILAR TO THE PROVISIONS OF SECTION 1 58 BE OF THE ACT. THEREFORE, THE DECISIONS RENDERED WITH REFERENCE TO THE PROVISIONS OF SECTION 158 BE WOULD BE RELEVANT WHILE DECIDING THE ISSUE OF LIMITATION U/S 153B. IT WOULD BE ALSO IMPORTANT TO UNDERSTAND THE SCOPE OF THE EXPRESSION ' PANCHNAMA'. PANCHNAMA HA S NOT BEEN DEFINED IN THE ACT. THE PROVISIONS OF THE CODE OF C RIMINAL PROCEDURE, 1973 ('CR. PC') RELATING TO SEARCH AND SEIZURE HAVE BEEN MADE APPLICABLE TO THE SEARCHES AND SEIZURE UNDER SUB-SE CTION (I) AND SUB- SECTION (LA) OF SECTION 132 OF THE ACT BY VIRTUE OF SUB-SECTION (13) OF SECTION 132. EVEN THE RELEVANT PROVISIONS RELATING TO SEARCHES AND SEIZURE IN CR.P.C DO NOT DEFINE THE WORD 'PANCHNAMA '. ONLY A FORMAT ITA NO.1733/DEL/2011 C.O.266/DEL/2012 8 IS PROVIDED IN WHICH PANCHNAMA IS TO BE PREPARED. T HE SAID FORMAT HAS BEEN ADOPTED BY THE INCOME-TAX DEPARTMENT FOR P REPARING THE PANCHNAMA. 'PANCHNAMA' IS ALSO NOT A WORD OF ENGLIS H LANGUAGE. HOWEVER, IN INDIA, 'PANCHNAMA' IS A WORD OF JUDICIA L RECOGNITION. 'PANCHNAMA' COMPRISES OF TWO INDIAN WORKS 'PANCH' A ND 'NAMA' MEAN-'WITNESS' WHILE 'NAMA' IS USED TO REPRESENT 'D OCUMENT'. THUS, 'PANCHNAMA' IN COMMON PARLANCE A WELL A' IN JUDICIA L CIRCLE IS UNDERSTOOD AS A DOCUMENTED PREPARED IN RESPECT 0 AN Y PROCEEDING IN THE PRESENCE OF WITNESSES. THE CONCEPT OF 'PANCHNAM A' HAS BEEN BROUGHT OR INTRODUCED VIS-A-VIS THE SEARCH AND SEIZ URE PROCEEDINGS IN ORDER TO SAFEGUARD THE INTEREST OF THE PERSON WHERE PREMISES HAVE BEEN SEARCHED AND TO CURB THE MISUSE OF THE POWERS OF SEARCH PARTY. THAT MEANS THE REQUIREMENT OF-THE PRESENCE OF WITNE SSES IS A SINE QUA NON FOR CONDUCTING OF A VALID SEARCH IN RESPECT OF WHICH PANCHNAMA IS TO BE PREPARED. FURTHER, THE OBJECT BEHIND THIS REQ UIREMENT IS THAT, ANYTHING FOUND AND SEIZED IS TRULY RECORDED IN THE PANCHNAMA. IF NOTHING IS FOUND, THEN SUCH FACT MUST BE MENTIONED IN THE PANCHANMA. ON THE OTHER HAND, IF SOMETHING IS FOUND, THEN IT M UST BE DULY INVENTORISED IN THE PRESENCE OF WITNESSES. FURTHER, IF ANY SEIZURE IS REQUIRED TO BE MADE, THEN THE SAME SHOULD ALSO BE M ADE- IN THEIR PRESENCE. ONCE IT IS DONE, THE SAME SHOULD BE TRULY RECORDED IN SUCH PANCHNAMA. SEARCH CAN BE SAID TO BE CONCLUDED IF AL L THESE TRANSACTIONS ARE COMPLIED WITH. IN THIS REGARD WE F IND STRENGTH FROM THE CONTENTS OF PARA 6 OF THE ORDER OF JUDICIAL MEM BER IN THE CASE OF NANDLAL GANDHI 115 ITD I (MUM). IN THE CASE OF CIT VS. SANDHYA P NAIK 253 ITR 534 ( BORN), THE QUESTION WAS WHETHER THE PROHIBITORY ORDER U/S 132( 3) WOULD EXTEND THE PERIOD OF LIMITATION U/S 158 BE. THE COURT DECI DED AGAINST THE REVENUE BY OBSERVING AS UNDER: 'ACTION U/S 132(3) OF THE INCOME-TAX ACT CAN BE RES TORED TO ONLY IF THERE IS ANY PRACTICAL DIFFICULTY IN SEIZING THE IT EM WHICH IS LIABLE TO BE SEIZED. WHEN THERE IS NO SUCH PRACTICAL DIFFICULTY THE OFFICER IS LEFT WITH NO OTHER ALTERNATIVE BUT TO SEIZE THE ITEM, IF HE I S OF THE VIEW THAT IT REPRESENTED UNDISCLOSED INCOME. POWER U/S 132(3) OF THE INCOME-TAX ACT THUS CANNOT BE EXERCISED SO AS TO CIRCUMVENT TH E PROVISIONS OF SECTION 132(3) READ WITH SECTION 132(5) OF THE INCO ME-TAX ACT. THE POSITION HAS BECOME MUCH MORE CLEAR AFTER THE INSER TION OF THE ITA NO.1733/DEL/2011 C.O.266/DEL/2012 9 EXPLANATION TO SECTION 132(3) EFFECTIVE FROM 117119 95, THAT A RESTRAINT ORDER DOES NOT AMOUNT TO SEIZURE. THEREFO RE, BY PASSING A RESTRAINT ORDER, THE TIME-LIMIT AVAILABLE FOR FRAMI NG OF THE ORDER CANNOT BE EXTENDED.' IN THE CASE OF B. K. NOWLAKHA & ORS VS. UOL 192 ITR 436 DEL, THE SEARCH WAS CONDUCTED ON 11/2/91 IN THE COURSE OF WH ICH CERTAIN UNEXPLAINED ASSETS INCLUDING ANTIQUE PIECES WERE FO UND. NO SEIZURE WAS MADE ON THAT DATE BUT ORDER OF RESTRAINT WAS PA SSED U/S 132(3) OF THE ACT WHICH WAS LIFTED ON 9/4/91. THE QUESTION BE FORE THE COURT WAS WHETHER SUCH ORDER WAS VALID ONE SO THAT PERIOD OF LIMITATION COULD BE EXTENDED FOR THE PURPOSE OF SECTION L32(5) OF THE A CT. THE HON'BLE COURT ANSWERED THE QUESTION IN FAVOUR OF THE ASSESS EE BY OBSERVING AS UNDER: 'COMING TO THE FACTS OF THE PRESENT CASE, WE FIND T HAT THE RESTRAINT ORDERS WHICH HAVE BEEN ISSUED U/S 132(3), FROM TIME TO TIME, SUFFER FROM TWO INFIRMITIES, FIRSTLY, FOR THE REASONS STAT ED IN THE REPLY AFFIDAVIT, WHICH ARE ALSO BORNE OUT FROM THE DEPART MENT'S RECORD, IT CANNOT BE SAID THAT IT WAS NOT PRACTICABLE TO EFFEC T SEIZURE. IN OTHER WORDS, THE CONDITIONS NECESSARY FOR THE EXERCISE OF THE JURISDICTION U/S 132(3) DID NOT EXIST. SECONDLY, WE FIND THAT TH E RESTRAINT ORDERS HAVE BEEN CANCELLED AND RENEWED FROM TIME TO TIME A ND, IN THE PRESENT CIRCUMSTANCES, WE DO NOT THINK THAT THIS WA S VALIDLY DONE.' 'SECTION U/S 132(3) CAN BE RESTORED TO IF THERE IS ANY PRACTICAL DIFFICULTY IN SEIZING THE ITEM WHICH IS LIABLE TO B E SEIZED. IF THERE IS NO PRACTICAL DIFFICULTY, THEN AN AUTHORIZED OFFICER HA S THE JURISDICTION AND DUTY TO SEIZE THE BOOKS OF ACCOUNT, OTHER DOCUMENTS , MONEY, BULLION, VALUABLE ARTICLES, ETC., WHICH ARE FOUND AS A RESUL T OF THE SEARCH, IF NO EXPLANATION IS COMING FORWARD IN RESPECT THEREOF. T HEREFORE, WHEN THE SEARCH WAS EFFECTED ON FEBRUARY 11, 1991, AND THE P ETITIONERS WERE UNABLE TO GIVE ANY VALID EXPLANATION AS DEMANDED BY THE RESPONDENTS, THEN THE ONLY POWER WHICH COULD HAVE BEEN EXERCISED OR SHOULD HAVE BEEN EXERCISED BY THE AUTHORIZED OFFICER WAS TO EFF ECT SEIZURE.' THOUGH THE ABOVE DECISION WAS RENDERED WITH REFEREN CE TO LIMITATION U/S 132(5) OF THE ACT YET IT WOULD BE RELEVANT FOR DECIDING THE ISSUE OF LIMITATION U(S L32(3) WOULD AFFECT THE PERIOD OF LI MITATION IN AS MUCH ITA NO.1733/DEL/2011 C.O.266/DEL/2012 10 THE VALIDITY OF LAST PANCHNAMA WOULD DEPEND ON THE VALIDITY OF THE ORDER U/S 132(3). IN THE CASE OF NAND LAL GANDHI-VS. ACIT 115 ITD L(M UM) (TM), SEARCH WAS CONDUCTED ON 28/7/97 IN THE COURSE OF WH ICH CERTAIN INCRIMINATING MATERIALS INCLUDING SHARES AND JEWELL ERY WERE FOUND WHICH WERE INVENTORISED. VALUATION OF JEWELLERY WAS ALSO MADE. A PANCHNAMA WAS PREPARED IN WHICH IT WAS MENTIONED TH AT ONLY BOOKS OF ACCOUNT AND DOCUMENTS WERE BEING SEIZED AND THE SEARCH WAS STATED TO BE TEMPORARILY CONCLUDED. A PROHIBITORY O RDER WAS ISSUED U/S 132(3) IN RESPECT OF THE SHARES AND JEWELLERY W HICH WAS LIFTED ON 8/9/97. A PANCHNAMA WAS ALSO PREPARED ON THAT DAY W HICH MERELY STATED THAT SEARCH WAS CONCLUDED. THE BLOCK ASSESSM ENT WAS CONCLUDED ON 30/9/99. THE QUESTION BEFORE THE TRIBU NAL WAS WHETHER ASSESSMENT WAS TIME BARRED. THE TRIBUNAL, BY MAJORI TY OPINION, HELD THAT PANCHNAMA DATED 8/9/97 AS WELL AS RESTRAINT OR DERS WERE INVALID AND THEREFORE, THE PERIOD OF LIMITATION WAS TO BE C OUNTED FROM THE END OF THE MONTH OF JULY 97. HENCE, THE ASSESSMENT WAS TIME BARRED. THE REASON GIVEN BY THE TRIBUNAL AS THAT EVERY ACT OF S EARCH WAS COMPLETED ON 28/7/97 AND NOTHING REMAINED TO BE DON E WITH REFERENCE TO THE SHARES & JEWELLERY SINCE THE SAME HAD ALRE3A DY BEEN INVENTORISED AND VALUED. FURTHER NOTHING WAS DONE O N 8/9/97 EXCEPT LIFTING THE ORDER. THEREFORE, THE ORDER U/S 132(3) WAS INVALID LT1 VIEW OF BOMBAY HIGH COURT JUDGMENT IN THE CASE OF SANDHY A NAIK (SUPRA). SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF DCIT VS. ADOLF PATRIE PINTO 100 ITD 191 (MUM), SARB CONSULAT E MARINE PRODUCTS 97 ITD 333(DEL). IN THE CASE OF V. L. S. FINANCE LTD. VS. CIT 289 IT R 286 (DEL), A SEARCH WARRANT WAS ISSUED AND SEARCH WAS CONDUCTED ON 22/6/98. HOWEVER, DUE TO VOLUMINOUS RECORD, SEARCH HAS TO BE CONDUCTED AGAIN AND AGAIN TILL 5/8/98 WHEN THE AS PANCHNAMA WAS PRE PARED. THE BLOCK ASSESSMENT REMAINED PENDING TILL 29/6/2000 WHEN ORD ER FOR SPECIAL AUDIT U/S 142(2A) WAS PASSED WHICH WAS ALLEGEDLY NO T RECEIVED BY THE ASSESSEE BY 30/6/2000. THE ASSESSEE CHALLENGED THE SAID ORDER IN THE WRIT PETITION BEFORE THE HON 'BLE DELHI HIGH CO URT. LATER ON, THE PETITION WAS AMENDED TO CONTEND THAT ASSESSMENT PRO CEEDINGS HAD BECOME TIME BARRED U/S 158BE OF THE ACT SINCE PERIO D OF LIMITATION SHOULD BE COUNTED FROM THE END OF THE MONTH OF JUNE 98 IN AS MUCH AS ITA NO.1733/DEL/2011 C.O.266/DEL/2012 11 SEARCH COULD NOT BE VALIDLY CONTINUED TILL 5/8/98 O N THE BASIS OF SINGLE AUTHORIZATION. THE COURT FOUND THAT THE SAID AUTHOR IZATION WAS REVALIDATED FROM TIME TO TIME AND THEREFORE SEARCH WAS VALIDLY CONTINUED TILL 5/8/98. CONSEQUENTLY, IT WAS HELD TH AT THE PERIOD OF LIMITATION HAD TO BE COUNTED FROM THE END OF THE MO NTH OF AUGUST 98 SINCE LAST PANCHNAMA WAS PREPARED ON 5/8/98. THE LEGAL POSITION EMERGING FROM THE ABOVE DECISION S IS THAT IF ALL ACTIONS OF SEARCH ARE COMPLETED AND NOTHING IS LEFT TO BE DONE BY THE SEARCH PARTY THEN, THE ACTION OF THE AUTHORIZED OFF ICER U/S 132(3) WOULD BE ILLEGAL AND CONSEQUENTLY ANY PANCHNAMA PRE PARED ON THE DATE OF LIFTING THE ORDER U/S 132(3) WOULD BE OF NO CONSEQUENCE FOR THE PURPOSE OF COMPUTING THE LIMITATION PERIOD U/S 153B . HOWEVER AN INTERESTING QUESTION AROSE ABOUT THE SCO PE OF THE EXPRESSION 'LAST OF THE AUTHORIZATIONS' MENTIONED I N SECTION 158BE BEFORE THE TRIBUNAL IN THE CASE OF SHAH RUKH KHAN V S. ACIT 104 ITD 221 (MUM). IN THAT CASE, ONE AUTHORIZATION WAS ISSU ED IN RESPECT OF RESIDENCE ON 17112/96 WHILE TWO AUTHORIZATIONS WERE ISSUED ON 23/12/96 IN RESPECT OF TWO LOCKERS. IN RESPECT OF S EARCH OF LOCKERS, PANCHNAMAS WERE PREPARED ON THE SAME DATE. HOWEVER, THE AUTHORIZATION DATED 17112/96 WAS ISSUED ON THREE DA TED I.E. 17112/96, 23112/96 AND 3011/97, THE CASE OF REVENUE WAS THAT PERIOD OF LIMITATION WOULD COMMENCE FROM THE END OF THE MONTH OF JANUARY 97 WHILE THE CASE OF ASSESSEE WAS THAT IT WOULD COMMEN CE FROM THE END OF THE MONTH OF DECEMBER 96. THE TRIBUNAL AGREED WITH THE CONTENTION OF ASSESSEE-BY OBSERVING AS UNDER: '16. FROM 'BARE READING OF SECTION 158BE IT IS CLEA R THAT THE ASSESSMENT HAS TO BE CONCLUDED U/S 158BC, IN CASES WHERE THE SEARCH IS INITIATED AFTER 30/611996 BUT BEFORE 1/6/1997, W ITHIN ONE YEAR FROM THE END OF THE MONTH IN WHICH THE LAST OF THE AUTHO RIZATIONS FOR THE SEARCH U/S L32 WAS EXECUTED. THE EXPLANATION 2 OF S ECTION 158BC WAS INSERTED BY FINANCE (NO.2) ACT, 1998 WITH RETRO SPECTIVE EFFECT FROM 11711995, WHICH MAKES IT CLEAR THAT THE AUTHOR IZATION REFERRED TO SUB-SECTION (1) OF SECTION 158BE SHALL BE DEEMED TO HAVE BEEN EXECUTED ON THE CONCLUSION OF SEARCH AS RECORDED IN THE LAST PANCHNAMA DRAWN IN RELATION TO ANY PERSON IN WHOSE CASE THE WARRANT OF AUTHORIZATION HAS BEEN ISSUED. THE SAID EXPLANATION IS WITH REGARD TO AUTHORIZATION REFERRED TO SUB-SECTIO N (1) WHICH REFERS ITA NO.1733/DEL/2011 C.O.266/DEL/2012 12 TO LAT OF THE AUTHORIZATIONS. WHICH MEANS THAT THE LAST OF THE PANCHANAM HAS TO BE TAKEN INTO ACCOUNT IN RESPECT O F LAST OF THE AUTHORIZATIONS FOR SEARCH, AS THERE COULD BE MORE T HAN ONE PANCHNAMAS IN RESPECT OF SAME AUTHORIZATION THE CUR X OF THE MATTER REMAINS THAT THE LIMITATION SHALL START FROM THE EN D OF THE MONTH IN WHICH LAST OF THE AUTHORIZATION IS EXECUTED. WE DO NOT AGREE WITH THE CONTENTIONS OF THE LD. CIT DR THAT ALL THE AUTHORIZ ATIONS ARE TO BE TREATED AS COMMON KITTY AND THE LAST DATE OF ANY OF THE AUTHORIZATIONS SHOULD BE TAKEN AS STARTING POINT FOR THE PURPOSE O F LIMITATION. THE SECTION 158BE CLEARLY STATED THAT THE LIMITATIO N WILL START FROM THE END OF THE MONTH IN WHICH LA T OF THE AUTHORIZATION S WAS EXECUTED. IT PRE-SUPPOSES THAT THERE CAN BE A SITUATION WHERE MO RE THAN ONE AUTHORIZATIONS FOR SEARCH U/S 132 ARE ISSUED AND TH E EXECUTION OF THE LAST OF THE SUCH AUTHORIZATIONS IS TO BE CONSIDERED AS THE STARTING POINT FOR THE PURPOSE OF LIMITATION. IT CLEARLY REFERS TO THE LAST AUTHORIZATION IN CASE WHERE MORE THAN ONE AUTHORIZATIONS ARE ISSU ED. AS SUCH IT CANNOT BE HELD THAT ALL THE AUTHORIZATIONS ISSUED S HOULD BE TREATED AS A COMMON KITTY AND ANYONE OF THE AUTHORIZATION WHIC H IS EXECUTED AT THE END SHOULD BE CONSIDERED FOR THE PURPOSE OF LIM ITATION.' 1 0.4 IT WOULD, THUS, BE CLEAR THAT WHERE VARIOUS AUTHORIZATIONS ARE ISSUED AND VARIOUS PANCHNAMAS ARE PREPARED, IT IS N OT THE LAST PANCHNAMA OF ANY AUTHORIZATION BUT IT IS THE LAST P ANCHNAMA PREPARED IN RESPECT OF LAST AUTHORIZATION WHICH IS THE RELEV ANT FOR COMPUTING THE LIMITATION PERIOD. SIMILAR VIEW HAS BEEN EXPRESSED IN THE FOLLOWING CI TED DECISIONS :- DCIT VS. ADOLF PATRIE PINTO 284 ITR (A. T) 207 AFF IRMED BY MUMBAI HIGH COURT (856 OF 2008 DATED 51912008. SLP DISMISS ED 322 ITR (ST) (HON'BLE SUPREME COURT). CIT VS. DEEPAK AGARWAL 308 ITR 116 (DEL.) SLP NO. 1636012009 DATED 91712009 DISMISSED. CIT VS. WHITE AND WHITE MINERAL PVT. LTD. 330 ITR 172 (RAJ) SLP DISMISSED CC 1138/2010 DATED 11212010. ITA NO.1733/DEL/2011 C.O.266/DEL/2012 13 CIT VS. O.P MANDORA 94 DTR (RAJ). 209 DATED 23/8/2 013. ACIT VS; SHRI RAM LIME PRODUCTS LTD. 2012 TIOL 329 ITAT JODHPUR SPECIAL BENCH DATED 61612012. RAKESH SAREEN VS. DCIT 2011 TIOL 185 HC- MAD-IT CI T VS. PLASTICA ENTERPRISES ITA 1211 (2008) MUM. DATED 151 1212008 RAKESH KUAMR JAIN VS. JCIT DATED 25/9/2012 (MAD.) TAX CASE 1240106. 10.5 IN VIEW OF ABOVE DECISIONS WHEN WE EXAMINE TH E FACTS OF THE PRESENT CASE, WE FIND THAT IN ALL THE CASES BEFORE US ASSESSMENTS U/S 153A AND 153C HAVE BEEN FRAMED IN PURSUANCE TO SEAR CH MADE ON 211312007 AND CONCLUDED ON 23/J/2007 ON THE AUTHORI ZATION DATED 20.3.2007. THEREAFTER NO SEARCH RELATING TO THE AFO RESAID ASSESSEES WAS MADE, ONLY PROHIBITORY ORDERS HAVE BEEN REVOKED THAT TOO RELATING TO ASSETS OF SMT. NEENA JAIN INVENTORY OF WHICH WAS ALREADY MADE ON 21/3/2007. THUS, THE ASSESSMENTS IN QUESTIO N WERE REQUIRED TO BE FRAMED BY 31112/2008 WHILE THE SAME HAVE BEEN FRAMED IN DECEMBER, 2009. WE ALSO NOTE THAT IN THE AUTHORIZAT ION LETTER DATED 20/3/2007 NAMES AND ADDRESS OF THE ASSESSEES 'IN QU ESTION HAVE NOT BEEN MENTIONED BUT IN PANCHNAMA DATED 15/5/2007 DRA WN IN PURSUANCE TO THE EXECUTION OF THE SAID AUTHORIZATIO N LETTER DATED 2013/2007 NAMES OF ALL THESE ASSES SEES HAVE BEEN M ENTIONED. PANCHNAMA ALSO SHOWS THAT ON 15/5/2007 SEARCH AT RE SIDENTIAL PREMISES STARTED AT 4.25 PM AND CONCLUDED ON 6:45 P M AND IN THIS SEARCH NOTHING RELATED TO THE ASSESSEE'S IN QUESTIO N WAS SEIZED. WE THUS FIND SUBSTANCE IN THE CONTENTION OF THE LD. AR FU'1D FULLY CONCUR WITH HIM THAT L'1E ASSESSMENTS IN QUESTION ARE BARR ED BY TIME LIMIT/AND AS SUCH ARE BEING QUASHED AS INVALID. THE GROUND NO.2 (ADDL. GROUND) IS THUS ALLOWED IN FAVOUR OF THE ASS ESSEE. 9. RESPECTFULLY FOLLOWING THESE DECISIONS, WE UPHOL D THE CONTENTION OF ASSESSEE AND ALLOW THIS GROUND OF ASSESSEE. AS THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE ON THE GROUND OF LIMITATION, WE DO NO ADJUDICATE THE OTHER ISSUES WHICH WOULD BE OF ACADEMIC NATURE. 10. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED A ND THE CROSS OBJECTION OF ASSESSEE IS ALLOWED. ITA NO.1733/DEL/2011 C.O.266/DEL/2012 14 11. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH AUG., 2015. SD./- SD./- ( C. M. GARG) (J. S. REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 14 .08. 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 22/7 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 23/7,7/8, SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 14/8/15 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 14/8 SR. PS/PS 7 FILE SENT TO BENCH CLERK 14/8 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER